By Jon Nadler
The US dollar was mostly higher
(84.82 on the index at last check) following the
historic win by Barack Obama in the US
Presidential elections. In historical terms, the
greenback could well be poised for further gains
- especially in the coming year. The currency
received a post-election boost all but twice
following US elections, and has, in addition,
recorded a 23% loss on the trade-weighted index
during the years of the Bush administration -
thus adding to the odds of a further rise.
President-elect Obama's first task might well be
the assembly of a strong economic team whose
mission will be to extricate the nation from the
economic slump it finds itself in, while trying
to avoid subsequently costly policy mistakes.
Clearly, with the expectations bar being as high
as it currently is, some disappointments will no
doubt be experienced, and some pain will need to
still be endured before conditions improve. At
any rate, America's first African-American
President will be far better equipped to handle
global issues once some kind of overhaul of the
domestic situation is achieved. The work to be
done is staggering, and Mr. Obama and his
eventual team will not be able to pull the task
off single-handedly. It will require the joint
efforts of practically everyone who cares about
what shape the future takes.
Oil (down $1.50 at $69) and gold gave back some
of yesterday's gains overnight and while stock
index futures pointed higher earlier, the stark
reality of US economic conditions once again
took over on the list of preoccupations that
hangs in front of trading stations and
individual 'where to invest' lists.
Notwithstanding the November 15 world summit to
fix the credit crisis and its fallout, team
Obama might begin placing its marks on things
well before inauguration. For example, the
probability that a second stimulus package could
be launched following the return to work of a
largely Democratic Congress in just two weeks.
All of this, before the big-ticket items such as
energy, health care, and public works come to
New York precious metals trading opened with
further losses this morning, following last
night's profit-taking in the wake of Tuesday's
rallies. Spot gold was off $6.00 at $755 as
participants were still gearing up for Friday's
employment (or rather, the lack thereof)
numbers. US jobs (157,000 lost in Oct. says ADP)
were being shed at a nearly 80% higher rate than
one year ago in the same month, as the financial
and automotive sectors went from bad to worse.
Job losses are on track for a monthly loss rate
of about 100,000 to 200,000 positions - a number
that (at least) matches those experienced in the
contraction of 2001.
Silver was ahead by 4 cents at the open, quoted
at $10.21 per ounce. Platinum rose $24 to $867
and palladium gained $3 to $211 as the complex
tries to regain its footing from apparently
oversold levels. Housing prices in the US still
appear to be only halfway into their price
correction - a fact that continues to derail
financials and materials. GMAC and GM face a
dwindling sand clock and are adding to the
caution being witnessed in the PGM group metals.
The stock market lost 6 trillion dollars of
value this year and has thus far not shown too
many signs of having bottomed. Under such poor
conditions, commodities may well take the a two
or so year breather and either try to form a
base or decline to somewhat lower levels.
Economist Dennis Gartman, appearing on Bloomberg
Television early this morning, said that he
believes the equity markets will continue to
rebound, albeit the worst has not yet been seen
in the US economy.
He has started to buy a "little copper and
steel" and feels that crude oil will still be
heading a lot lower in the medium-term. Lower
oil equates an 'easy tax cut' for the new
President, in addition to a $300 billion
stimulus package he hopes Mr. Obama will fire
off. Mr. Gartman also says that the 'safe' thing
to do at the moment - as regards gold - is to
remain on the sidelines, and let others "try to
Mr. Gartman said that he could make a case for
both gold price scenarios (up/down) at this
time, but while he has been bullish on gold in
past months, at the end of the day (today), he
remains uncertain about the metal's immediate
price prospects. Having failed just short of the
$800 level late last month, gold still faces
headwinds that are not to be taken lightly.
Traders we spoke to while in NY, feel that the
price risk is still to the downside, and that
they are seeing investment coin and bar supply
levels improving, and premiums coming down.
Ditto, silver - which appears to find more
buyers under $10 than above it.
We leave you now with Marketwatch's David
Callaway, and his laundry-list of proposed Mr.
Obama 'To-Do's' as he prepares to take office in
"Has it really been eight years? Eight years
since that fateful Election Night when we all
stayed up as long as we could through the dark
hours without a president, only to wake up to
some of the darkest years in our American
If we've learned one collective lesson, it's to
never again say "How bad could it be?"
That's why the sense of hope that swept Barack
Obama into the White House on Tuesday night
could be felt around the world, from the
celebrations in Kenya about how one of its
descendents could be the first black man elected
U.S. President to the parties in Europe, Asia,
and around America herself.
At a time when everything looks so grim, the
temptation to grasp at any hope is too good to
resist. Obama offered that hope, and largely
because of the economic crisis of the past
several weeks, he was rewarded with an electoral
A furious rally on Wall Street helped kick off
the Obama victory Tuesday, but as the
President-elect will soon learn, Wall Street is
a fickle mistress. He inherits a set of
challenges not seen since FDR: a broken
financial system, an ailing infrastructure, a
growing environmental crisis, an
economically-thrashed public, and two wars.
No president, even with an overwhelming majority
in Congress like Obama will have, can ever hope
to solve all of this. But progress can be made
on all fronts. Indeed, just turning in the right
direction on some of them would be a success.
On the economy, though, voters expect results.
Obama must solve a financial calamity that
requires billions of dollars in spending that
the U.S. doesn't have.
He must address a nation that feels overtaxed,
yet is in desperate need of funds to save
companies, jobs and homes.
The President-elect must realign a broken
financial regulatory system without adding a
crippling new set of regulations.
He must restore confidence in America's economy
in a world that just got sucker-punched by an
exported credit crisis that is causing a global
He must pick a Treasury Secretary under the
greatest global scrutiny a President has ever
seen, not to mention cabinet posts for Defense,
Environment, and even Trade that will take on
strategic importance far beyond their historical
Most importantly, he must enact as many of the
vital social programs as he can while also
cutting the national debt and budget deficit.
All of this is a high-wire act to be sure. Obama
will face wealthy and powerful opponents who
will make beating John McCain seem like an
Election Day basketball lay up. Inaction is what
Washington thrives on. It's no coincidence that
the stock market does best when the government
is split between the political parties. This is
exactly what Obama can't afford in his first 100
days, or even his first year in office.
After eight years of fighting as the loyal
opposition and two years of campaigning for this
historic win, Obama and the Democrats will
finally get their chance to prove their case.
That they will benefit from an economic recovery
at some point in the next four years is a given.
And the stock market has fallen so much that it
no doubt will also recover at some point in a
first Obama term. So will commodities, and even
the recently resuscitated dollar.
As he faces the nation in January on
Inauguration Day, 76 days from now, Obama will
carry the hopes of several previously overlooked
constituencies -- blacks, Latinos, youths,
foreigners, the jobless and homeless and
health-care-less -- along with Wall Street, the
rich and comfortable, and even the opposition.
The one thing that unites all of these
constituencies is economic progress.
No doubt his speech will be soaring and
inspiring. But once he has made it to the White
House, his actions will be measured far more
than his words. This historic election will be a
milestone in American politics. But Obama's real
place in history will measured by whether he
actually has the chops to reform and rebuild an
economy -- the largest in the world -- gone
horribly and irrevocably awry."
Let's watch for post-election punditry and
team-building. Names such as Paul Volcker have
been floated this morning (by none other than
Steve Forbes). Who knows? Mr. Forbes opines that
the Bush administration's biggest mistake was to
sacrifice the US dollar's value.
Keep trading lightly as conditions remain
nebulous. Safely disregard prognostications that
involve the words "for sure" and "no doubt."